Presentation to Urban Regeneration Companies 4th Annual Conference Why Invest In Urban Regeneration

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Presentation toUrban Regeneration Companies
4th Annual ConferenceWhy Invest In Urban
Regeneration?8th September 2005 Barbara
Turnbull Senior Director Royal Bank of
Scotland, Property Ventures, Structured
Finance
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Priority Sites - Background

• Established October 1997 as a joint venture
  between RBS (51) and English Partnerships (49),
  Priority Sites brought together the financial
  strength of one of the biggest banking groups in
  Europe with the governments national
  regeneration agency
• Remit to undertake speculative development of
  industrial space in areas of economic need where
  private sector feared to tread
• Initial Phase I target of 1.3 million square feet
  of industrial floor space over 3 years focussing
  on areas where there was unfulfilled demand from
  local companies and inward investors
• Priority Sites is now renowned as one of the most
  active speculative commercial developers in the
  country
• Shareholders agreement to Phase II of Business
  Plan at end 2001 saw programme increase to
  deliver target of 3.5 million square feet by
  2007, with some diversification into
  office/workshop sectors

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Other Examples of RBS Public / Private Sector
Joint Venture Deals

• Welsh Industrial Partnership a 30 million
  programme of industrial development
  throughout Wales with the Welsh Development
  Agency
• Higher Broughton Partnership a 5 phase
  regeneration project in Salford in partnership
  with the Council and developers Inpartnership
  and City Spirit
• Cart Corridor JV Ltd an area-specific mixed
  use regeneration project in Renfrewshire in
  partnership with Renfrewshire County Council
  and Scottish Enterprise

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Key Issues for Financial Investors in
Regeneration Projects

• Certainty of involvement of key delivery parties
  through a legal or contractual structure
• Sharing of risk and reward amongst key financial
  and delivery partners
• Complementary skills of partners or key
  contractors
• Forecast return on investment monies at risk
  commensurate with length and risk of project
• Common understanding and appreciation of
  partners drivers and required outputs
• Flexibility of structure and operational aspects
  within confines of partners stated drivers
• Continuing active involvement in decision making
  by those who have authority, knowledge and
  responsibility for project

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Attractions Often Inherent in Regeneration
Projects

• Spread of risk geographic or across different
  property sectors
• Possibility of phased programme of returns and
  reinvestment
• Opportunities for repeat business further
  phases of project with some partners in
  nearby areas
• Opportunity to cross-sell other financial
  products

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The Potential Pitfalls

• Very long lead times due to complexity and size
  of typical schemes
• Complexity of land assembly
• Need to tender for partners, giving disincentive
  to private sector to commit resource / brainstorm
  / put forward original ideas at early stage
• Over complicated structuring and time consuming
  debate with fee-earning professionals, engaged
  before any tendering process or discussion with
  prospective partners, can serve to add time
  delays and cost
• Financial investors like to model and commit to
  real projects. The less certain the initial
  phase of a regeneration project is, the more
  difficult to get the level and detail of
  commitment that the project should be seeking